The Canadian Real Estate Association is raising its forecast for home sales this year, as the steep sales slump that began last summer appears to be abating.
The association, which represents realtors across the country, said Monday that the number of existing homes that changed hands in May came in 2.6 per cent lower than the prior May. About 60 per cent of the local markets that it gathers data from posted sales that were below last year’s levels.
MORE RELATED TO THIS STORY
But May’s sales were up 3.6 per cent from April, a sign of momentum. It’s the largest month-over-month increase in almost two and a half years, the association said.
It has now raised its prediction for sales levels this year, having steadily ratcheted it down prior to this. It now expects 443,400 homes to sell over the Multiple Listing Service in 2013. That’s down 2.5 per cent from last year, but is up from the 2.9 per cent declines that the association forecast in March. Between last summer and March it had cut its forecast three times.
It expects that both Alberta and Prince Edward Island will see sales gains this year, while sales in the remaining provinces will be below 2012 levels. It attributes the decline to the tougher mortgage insurance rules that Finance Minister Jim Flaherty imposed last July, in a bid to stem rising consumer debt levels and house prices.
“The pop in Canada’s resale housing numbers adds one more to a series of upbeat economic indicators that exceeded expectations in recent weeks,” Canadian Real Estate Association chief economist Gregory Klump stated in a press release. “It’s important not to put too much stock in one month’s worth of data, but taken together with other recently published economic gauges, Canadian resale housing market results provide further evidence of the widely anticipated firming trend for [the] Canadian economy.”
The average price that houses sold for in May, meanwhile, came in at $388,910, which is 3.7 per cent higher than a year ago. The MLS Home Price Index, which seeks to give a more apples-to-apples comparison than the basic average, but is based on data from only eight local cities or areas, rose 2.3 per cent. The gains in the Home Price Index had been smaller each month of late, as price growth has fizzled, but the latest 2.3-per-cent increase compares to a 2.2-per-cent increase in April. Nevertheless, the association pointed out that it is still the slowest rate of price growth in more than two years, with the exception of March and April of this year.
Declining sales in the Greater Vancouver area, where prices are high, had been exerting a downward pull on the national average sale price for almost two years, the Canadian Real Estate Association said. But a tiny uptick in sales in that city last month boosted the national average price, the first time that’s occurred since August 2011.
In addition to boosting its expectations for sales levels, the association is also raising its expectations for price gains. It now expects the national average sales price this year to come in at $370,900, up 2.1 per cent from last year. It said a change in sales levels among various parts of the country is a key reason why it is revising its estimate.
“Steep declines in sales activity in Greater Vancouver and Greater Toronto during the second half of 2012 weighed heavily on average prices in British Columbia, Ontario and nationally at that time,” it stated. “Since then, their share of national sales activity has improved and their weight in the national average price calculation has risen.” Tara Perkins, Globe and Mail